Accountability in Complex Organizations: World Bank Responses to Civil Society pot

The International Monetary Fund IMF was to stabilize the international monetary system, particularly in response to the disintegration of the world economy resulting from the Great 1 The

Copyright © 2007 by Alnoor Ebrahim and Steve Herz

Working papers are in draft form This working paper is distributed for purposes of comment and discussion only It may not be reproduced without permission of the copyright holder Copies of working papers are available from the author

Accountability in Complex Organizations: World Bank Responses

to Civil Society Alnoor Ebrahim Steve Herz

ABSTRACT *

Civil society actors have been pushing for greater accountability of the World Bank for at least three decades This paper outlines the range of accountability mechanisms currently in place at the World Bank along four basic levels: (1) staff, (2) project, (3) policy, and (4) board

governance We argue that civil society organizations have been influential in pushing for greater accountability at the project and policy levels, particularly through the establishment and

enforcement of social and environmental safeguards and complaint and response mechanisms But they have been much less successful in changing staff incentives for accountability to

affected communities, or in improving board accountability through greater transparency in decision making, more representative vote allocation, or better parliamentary scrutiny In other words, although civil society efforts have led to some gains in accountability with respect to Bank policies and projects, the deeper structural features of the institution — the incentives staff face and how the institution is governed— remain largely unchanged

* Please direct inquiries to: Alnoor Ebrahim, Wyss Visiting Scholar, Harvard Business School Email:

Among institutions of global governance, the World Bank is one of the most visible and most frequently targeted by civil society organizations (CSOs) located in both the global North and South The critiques vary widely On one hand are those who see the Bank as the fount of a neoliberal globalizing agenda responsible for increasing poverty and indebtedness by promoting inequitable projects and policies On the other hand are those who see the institution as a necessary multilateral actor in global development, but much in need of reform The tactics of these civil society critics have also varied greatly, ranging from highly visible protests and confrontations about social and environmental impacts of Bank activities, to more collaborative efforts with management and staff in order to gain influence from the inside

What difference has this civil society activism made? More specifically, how and to what extent

have civil society actors furthered the accountability of the World Bank to its constituents? The

case of the World Bank is important to the central question of this volume for two main reasons: the Bank has not only been a major target of civil society activism, but it has also been

comparatively responsive in developing various forms of engagement with civil society, possibly more than any other multilateral institution

We begin this paper with a brief introduction to the World Bank, followed by a set of normative arguments on the key accountability challenges facing the institution We then provide an

overview of the accountability mechanisms currently in place at four different organizational levels in the World Bank While this approach does not enable an investigation of each

mechanism in depth, it has the advantage of situating accountability efforts within a complex organizational landscape, and the roles of civil society actors within it We then discuss, in more detail, efforts undertaken by civil society groups to increase accountability — especially in terms

of the Bank’s own policies and projects We note both the successes and failures of these reform efforts.2 Finally, we close with some reflections on the implications of our analysis for

understanding the deeper structural conditions of global governance

THE WORLD BANK’S DEMOCRATIC ACCOUNTABILITY CHALLENGE

A Snapshot of the World Bank Group

Created in 1944, in the midst of World War II by delegates from all forty-four allied nations, the so-called Bretton Woods institutions were designed to serve two distinct functions The

International Monetary Fund (IMF) was to stabilize the international monetary system,

particularly in response to the disintegration of the world economy resulting from the Great

1 The authors are grateful to numerous individuals: to Jan Aart Scholte for his invitation to present an earlier version

of this paper at the University of Gothenburg, Sweden in June, 2007 as part of a larger project on “Civil Society and Accountable Global Governance;” to Srilatha Batliwala for extensive comments and for crystallizing the “deep structure” element of our argument; and, to Rachel Winter-Jones, John Garrison, and Carolyn Reynolds-Mandel of the World Bank’s Global Civil Society Team for their very helpful and generous feedback Responsibility for the content and opinions reflected in this paper rests solely with the authors

2 We do not examine civil society initiatives that aim to shut down the institution, although we note that these are important both in their own right and in terms of adding pressure for reform

Depression and the war At the same time, the International Bank for Reconstruction and

Development (IBRD) was formed with the more limited purpose of funding post-war

reconstruction largely in Europe and Japan Both were to be headquartered in Washington, D.C The IBRD later expanded its mission to the funding of “development” activities, and is now the primary lending arm of the World Bank Group which is comprised of five organizations: the IBRD, the International Development Association (IDA) , the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID) The mission of the group is “To fight poverty with passion and professionalism for lasting results To help people help themselves and their environment by providing resources, sharing knowledge, building capacity and forging

partnerships in the public and private sectors.”3 The focus of this paper is primarily on the IBRD and IDA, which are intended to provide funding to Southern governments for development activities, particularly to countries which might otherwise find it difficult to secure financing.4 Figure 1 is the official organization chart provided by the World Bank The diagram points to several structural features relevant to accountability which are discussed further below: a) the organization has a two-tier governance structure, with a governing board made up of

representatives from 185 member countries, from which an executive board with 24 directors is formed; b) the president reports to both boards, although he is selected by the U.S government under an informal “gentleman’s agreement” with the Europeans who select the head of the IMF; c) most of the units in the Bank (i.e., the regions and networks) report to a managing director who reports to the president; and, d) two units report directly to the board rather than to

management (i.e., independent evaluation and the inspectional panel) Altogether, the World Bank Group employs about 10,000 staff, of which approximately seventy percent are based in Washington, DC (World Bank 2006c).5

[Figure 1 About Here]

Accountability Challenges

The normative arguments for increasing Bank accountability to citizens and civil society are a

result of its role as both a public and a development organization Not all global institutions

examined in this volume have these two characteristics, both of which are accompanied by a set

of expectations, or imperatives, about what constitutes accountable behavior.6 First, as a public

3 See http://go.worldbank.org/DM4A38OWJ0 , accessed August 30, 2007

4 The IBRD provides loans to governments, charging interest to recover the cost of borrowing The IDA was created

in 1960 to provide concessional loans, often below market interest rates, to the poorest governments (Patomäki and Teivainen 2004), and now also provides interest-free loans and grants The IFC and MIGA provide financing to the private sector, with the former providing loans and equity finance, and the latter encouraging foreign investment by providing guarantees against loss The ICSID assists in settling investment disputes between foreign investors and host countries (World Bank 2006c)

5 To put this number in perspective, consider that Microsoft Corporation employs about 76,000 people worldwide, and the Bangladeshi NGO BRAC employs about 40,000

6 Among the institutions studied in this volume, those with both a public and developmental purpose include the

UN, the IMF, the OECD, the Global Fund, and the Commonwealth Secretariat This is less explicit in the case of ICANN, the OIC, the WTO, and IFAT, or arguably even among leadership summits such as the G8 and ASEM

institution, the Bank’s legitimacy relies on decision making processes that, at the very least, conform to basic public expectations and norms about transparency, participation and responsive governance.7 As the public increasingly expects that democratic principles will inform

international as well as national decision-making, the pressure on international institutions to democratize and pluralize their decision-making will only rise Indeed, most, if not all public international institutions have been forced to at least begin to re-align their decision-making with these expectations (e.g., Asian Development Bank 2004; United Nations 2004) The Bank, no less than these other institutions, is under public pressure to meet this challenge in order to earn and maintain public support for its policies and programs (Falk and Strauss 2001: 220)

Second, the Bank’s effectiveness as a development institution relies on a degree of inclusiveness and responsiveness to “the poor” whose lives are affected by its work The World Bank has consistently found a high correlation between the extent and quality of public participation and overall project quality (World Bank 1996; 2000c; 2002a; 2006d) Moreover, democratic participation and accountability have also been shown to be critical in enabling societies to avert catastrophes such as war and famines by providing governments with the information and political incentives necessary to avoid them (Sen 1999: 51, 180-181; Singer 2002: 132) Equally important, development is now understood to be a multidimensional challenge that is broader than alleviating income poverty (Bradlow 2004: 207) It includes improving the capacity of the poor to exercise voice and political power to gain equitable access to resources and opportunities, and to defend their rights and interests in the political process (Narayan 1999: 7,12) As the World Bank has recognized, empowering the poor to influence the decisions that will affect their lives is therefore a critical dimension of development (McGee and Norton 2000: 68; World Bank 2002b: vi) This requires that the poor must be able to express their interests, and to impose sanctions on decision-makers that fail to respond effectively to those interests (World Bank 2004b: 79) Many civil society efforts to enhance accountability in the World Bank have thus sought to increase the influence of the poor, particularly through timely access to information, direct participation in the design and monitoring of development projects, and access to instruments of redress

In other words, the World Bank faces two basic challenges related to democratic accountability:

a challenge of democratic legitimacy premised on its public nature, and a challenge of

effectiveness premised on its developmental purpose As the scholar Ngaire Woods has argued,

these dual challenges are inter-linked and mutually reinforcing, thus making it essential in institutions of global governance to enhance both legitimacy and effectiveness (Woods 2007)

THE LANDSCAPE OF ACCOUNTABILITY AT THE WORLD BANK

We turn now to an exploration of the various mechanisms of accountability currently in place at the World Bank Table 1 is a preliminary attempt to organize the disparate range of mechanisms into four “levels” of accountability The first column identifies the levels at which the

7 It should be noted that many of the governments of countries that are members of the Bank don’t necessarily subscribe to such norms of good governance Nonetheless, this does not obviate the fact that the Bank itself is a public institution that espouses norms of good governance, and it can thus be expected to uphold practices of transparency and responsiveness

accountability mechanisms operate — i.e., whether they target staff, projects, internal bank policies, or board governance The second column lists a number of mechanisms that are

currently in place to varying degrees in the Bank, while the third notes some of the resultant accountability gaps The levels are not sealed off from one another, but can interact For

example, Bank policies on disclosure or environmental safeguards ultimately affect both the compliance requirements at the project level, and the technocratic expectations at the staff level Each level, and its associated “regime,” is discussed in detail below

[Table 1 About Here]

Staff Level Accountability

Like most large and complex bureaucracies, the World Bank has multiple and, at times, competing organizational cultures and incentive structures that influence its priorities, accountability, and effectiveness.8 Attention to the people affected by Bank projects, and to civil society groups, is important as a means of enabling “downward” accountability to citizens, rather than simply “upward” accountability to donor governments.9 What, then, are the incentives within the institution for staff to pay attention to the voices and interests of those affected by their projects? In other words, what are the incentives for encouraging participation by the poor?

Overall, task managers “paint a sobering picture of the environment for participation within the Bank” (World Bank 2000c: 25) Impediments to engaging project-affected people include insufficient funding, inadequate time for mission work in the field, pressure to process loans and disburse funds rapidly, and inadequate support from management (World Bank 2000c: 25-27; World Bank 2005b: 16, para 30) The main constraints may be grouped as follows:

• Resources for civil society engagement are significant, but are not systematically

available for all projects While there are considerable funds for conscientious task managers (or team leaders) who wish to seek them, they are not earmarked or allocated, a priori, across projects.10 This means that task managers interested in citizen participation can obtain resources for it, but those who are less interested face

no positive incentives The problem thus remains that community participation and accountability are frequently viewed by managers as “add ons” and a drain on time and capacity This is reflective of a broader climate within the Bank, in which participation is encouraged but not mandated

• Staff appraisals do not evaluate the quality and impact of participatory mechanisms

employed by staff Staff have neither positive nor negative incentives to improve the quality of participation beyond compliance with the letter of consultation requirements Guidance and training are optional, and incentives to improve participation skills are weak As a result, consultations with citizens can be held for

8 For a broader look at this set of issues, see (Tendler 1975; Wilson 1989: 90-110)

9 The distinctions between upward and downward accountability in international development contexts draw from Edwars and Hulme(1996) and Najam (1996)

10 Budgets for engaging the public have grown substantially and there are about 120 staff worldwide who serve as civil society focal points and have access to funds for organizing consultations with CSOs Other resources to task managers include communications officers (some 300 across the institution) and about 100 public information centers worldwide (Email communication with World Bank Civil Society Team, August 31, 2007)

the limited purpose of technically complying with policy requirements, rather than to enhance accountability to affected communities

• Lending pressures reward quick appraisal and disbursement, and deference to

borrower governments Moving money is valued for promotion, while attention to participatory monitoring and evaluation generally is not Furthermore, rigid and short project cycles do not allow for time-consuming and labor-intensive participatory planning processes

• Technical expertise is highly valued in justifying project and policy lending decisions,

for recruitment, and for maintaining one’s status in the organization This deference

to technical expertise appears to be at odds with considering a full range of alternative policy and project options which may require collaborative, rather than authoritative, use of knowledge Thus, the emphasis on technical expertise serves as a disincentive

to public engagement

The accountability regime operating at the level of professional staff may be described as

technocratic due to its emphasis on technical skills and knowledge, and the dearth of incentives

and resources for citizen engagement and participation These factors serve as disincentives, even to well-meaning staff, in spending scarce time and resources on developing means of downward accountability to citizen groups and affected communities

These observations about the incentive structure for professional staff within the Bank are not new An internal World Bank task force in 1992, headed by then Vice President Willi

Wapenhans, famously described a “culture of approval” within the Bank The Wapenhans

Report called into question the credibility of the Bank’s appraisal process, observing that many Bank staff used appraisals as marketing devices for securing loans – as part of “an ‘approval culture’ in which appraisal becomes advocacy” (World Bank 1992: 14, 16) Staff surveyed for that report provided various reasons for poor portfolio performance management, with the most significant factors being inadequate resources, especially inadequate time for supervision, deficient staff skills, distorted incentives, and pressures to lend (Thomas undated: 6; World Bank 1992: 17)

While it is not clear to what extent these same problems persist today, a 2005 Bank evaluation of its projects in Community-Based and Community-Driven Development (CBD/CDD) suggests they remain significant For example, pressures associated with short project cycles remain unchanged, despite a recognition that the one-year subproject cycle typical of most Bank activities is too short for participatory community projects In terms of resources for staff, the report notes “the Bank’s preparation and supervision costs for CBD/CDD projects are already higher than for [other] projects, and there are no additional incentives for country directors to provide the additional resources required to prepare and supervise these operations” (World Bank 2005c: pp 21, 46) More pointedly, an appendix to the same report includes feedback from a prominent advisory board member, Robert Chambers, who observes: “The staff incentive system of the Bank rewards high and fast disbursements This was a major factor which emerged from a participatory workshop for task managers which I facilitated a few years ago Nothing I have heard suggests that this has changed significantly” (World Bank 2005c: 152)

Furthermore, the Bank’s recent return to higher-risk large infrastructure projects, particularly in middle-income countries with better repayment rates, suggests that the pressures to move money remain strong This is evidenced by a heightened concern that the transactions costs of its environmental and social safeguard policies are a substantial impediment to doing business in middle-income countries (World Bank 2001b; World Bank 2005a: 5,8), and even in poorer countries given the increasing availability of loans from China which come without such conditions (Wallis 2007) This erosion of the Bank’s market, coupled with a deference to large borrower governments which may not be particularly receptive to citizen accountability and participation in the first place, serve to reinforce lending pressures at the expense of civil society engagement and downward accountability

Yet, despite the institutional disincentives and lack of management support, task managers who are willing to attempt participation tend to believe strongly in its benefits The overwhelming majority of task managers that employ participatory processes believe that it has improved the quality of the operations that they manage As a result, experience with public participation motivates more participation (Rukuba-Ngaiza et al 2002: 8, 25; World Bank 2005b: 21).Two units within the Bank — the Civil Society Team and the Participation and Civic Engagement Team — have consistently sought to support staff in engaging with civil society, and to raise the profile of such engagement within the institution

Their recommendations for more systematically drawing on civil society experience and for improving the Bank’s responsiveness to communities and civic groups were detailed in a report

titled Issues and Options for Improving Engagement between the World Bank and Civil Society

(World Bank 2005b) The report laid out a ten-point action plan, which included a review of funding opportunities and procurement framework for civil society engagement, developing new guidelines for collaboration with CSOs, holding regular meetings with senior management and the Board to review Bank-civil society relations, and better supporting staff through an institution-wide advisory service and learning program Two years on, progress on this action plan has been mixed, having been slowed in part by two presidential transitions On one hand, training offerings and a help desk have been expanded and revised, and guidance materials for mapping civil society are in development.11 On the other hand, efforts to create a new formal mechanism for global civil society engagement have not been reciprocated by interest from international civil society groups (many of which were involved in previous consultative processes) As of late 2007, the Bank’s engagement with civil society may thus be described as primarily issue- or country-focused, supplemented twice annually with civil society forums organized by the Bank around its fall and spring meetings

Finally, two important accountability features at the staff level are the World Bank’s Internal Audit Department, and its Department of Institutional Integrity (INT) The former overseas risk management and internal controls, while that latter investigates allegations of misconduct, fraud, and corruption at the Bank, both among its staff and its operations Both units report directly to the Bank president (as shown in the organization chart in Figure 1) A look at INT’s most recently available annual report suggests that it has been quite active: since 1999 it has sanctioned 337 firms and individuals for corruption or fraud; in 2005-6 alone it debarred 58 firms and 54 individuals; and of 78 staff cases it investigated in 2005-6, it fired or barred from

11 Personal communication with the World Bank Global Civil Society Team, August, 2007

rehire 43 and disciplined eleven The department also investigates allegations by whistleblowers, while providing confidentiality and certain protections against retaliation.12

At the same time, INT has come under heavy scrutiny from civil society for failing to uphold standards of integrity itself, with allegations including: a conflict of interest concerning the department director who also serves as a counselor to the Bank president (thus compromising credibility and independence from management); routine breaches of confidentiality during investigations between 2005-2007; complex personal, professional and financial relationships among the department, American political actors, and a corporate intelligence firm; a failure to comply with an authorized audit, which was suspended by former Bank president Paul Wolfowitz in March 2007; and a series of allegations concerning suppression of information or failure to investigate specific projects.13

Some of these critiques are supported by a review of INT by a panel of outside experts that was conducted at the request of the Bank Headed by Paul Volcker, a former chairman of the U.S Federal Reserve Board, the panel noted several important achievements by the department, but expressed concern about both the independence and operational context of INT On the issue of independence, the panel suggested dropping the role of counselor to the president by the head of INT, and forming an external Advisory Oversight Board made up of “widely respected individuals with strong professional credentials drawn from outside the Bank” (Volcker et al 2007:3) The panel also suggested modifications to the disclosure practices for greater transparency and to better enable cross checking of information for factual accuracy The panel also noted “serious operational issues and severe strains in relations with some Operations units” observing in particular that:

Investigators—even well-trained investigators acting with the highest professional standards—are not typically candidates for popularity prizes in any organization Within the World Bank the tensions and resistance have been particularly strong .There is a tendency as well to shrink from confrontation with borrowing countries [that] is reinforced by a culture of the Bank that favors seeking out lending opportunities rather than simply responding to borrowing countries’ initiatives and felt needs (Volcker et al 2007:8)

In sum, while the technocratic accountability regime at the staff level is supported by numerous formal mechanisms — staff appraisals, integrity and audit functions, and considerable resources for citizen engagement — there remain two key sets of gaps The first, involving the Department

of Institutional Integrity, concerns the actual independence of the unit from management, which has been called into question by allegations of conflict of interest and political interference The second, and perhaps more critical, gap is the persistence of a culture of lending and approval within operational units, and the absence of incentives for task managers to systematically secure citizen voice and downward accountability Although there are significant resources available to

12 The Bank’s whistleblower policy was under revision, in consultation with the Bank Staff Association, at the time

of this writing

13 This critique is taken from a report released by a whistleblower group at the time of this writing (Government Accountability Project 2007)

task managers for citizen engagement, these are neither available a priori to all projects, nor are they backed up by incentives or mandates for participation As a result, while the Bank has increasingly encouraged citizen participation and accountability to the poor, this is structurally undermined by the persistence of performance incentives and lending pressures that remain largely unchanged

Project Level Accountability

The project level contains a number of highly developed mechanisms of accountability, many of which have emerged as a result of civil society pressure The most noteworthy of these are:

• An information disclosure policy designed to increase transparency and access to Bank documents, and to make them available online and through public information

centers in various countries and languages;

• A series of ten safeguard policies that detail the procedures and protections that must

be followed when a project is likely to have significant social and environmental impacts;

• An Independent Evaluation Group (IEG) that conducts detailed analyses of Bank

activities and is accountable directly to the Bank’s board rather than to management The aims of the IEG’s evaluations are “to learn from experience, to provide an

objective basis for assessing the results of the Bank's work, and to provide

accountability in the achievement of its objectives.”14 The unit has frequently been critical of Bank activities, and its reports are often used by civil society organizations

to buttress their own claims Internally, a Quality Assurance Group (QAG) supports

staff in improving the quality of projects and impacts, and was created in the 1990s as a result of IEG evaluations pointing to the failure of one-third of Bank projects to achieve their objectives

mid-• Two complaint and response mechanisms are also available to citizens and civil

society, through which they may report possible violations by the Bank of its own policies (particularly of its social and environmental safeguards) These “redress”

mechanisms are the World Bank Inspection Panel (for the public sector arm of the

Bank) and the Compliance Advisor/Ombudsman (for the private sector lending arm)

This collection of project level accountability mechanisms may be described as part of a

compliance regime, because of the emphasis on explicit internal policies and procedures that

staff must follow.15 The core of the compliance regime is the safeguard and disclosure policies

— and it is thus directly affected by the quality of the consultations at the policy level through

which such policies are reviewed (discussed below)

Since the 1980s, civil society organizations have mounted sustained advocacy campaigns to hold the Bank accountable for the negative environmental and social impacts of its operations.16

These campaigns have been successful in forcing the Bank to consider the negative impacts of its lending operations, and to adopt a set of safeguard policies on sensitive issues such as

environmental impacts, involuntary resettlement, and the impacts on indigenous peoples.17 For civil society organizations and affected peoples, these policies have become the touchstone of the Bank’s accountability for the impacts of its projects They represent normative commitments by the Bank regarding the planning processes and development outcomes that it will require for a project or program to be eligible to receive its support They also establish minimum standards regarding how the rights and interests of locally affected communities will be protected, and provide some assurances that the costs of Bank-financed projects will not be disproportionately borne by vulnerable members of society or their environment Some of the safeguard policies, including the Environmental Assessment, Indigenous Peoples, and Involuntary Resettlement Policies, also provide minimum guarantees that local communities will have the opportunity to participate in decisions that affect them

Mechanisms of quasi-judicial accountability, such as the Inspection Panel (IP) and the

Compliance Advisor/Ombudsman (CAO), kick in when public complaints are filed by persons who believe they have been harmed (or are likely to be harmed) by Bank-supported projects The

IP operates independently of Bank management, reporting directly to the executive board In the fiscal years 2005 and 2006, it received seven complaints Its investigations focus on determining whether the Bank has violated its own operational policies and procedures, particularly the safeguards In contrast, the CAO plays a more flexible role in the Bank’s private-sector

operations, sometimes responding to complaints as an ombudsman, but also overseeing audits of compliance with social and environmental performance requirements. 18 In 2005 and 2006, it received 27 complaints, of which it accepted 18 for further investigation The CAO reports to the Bank president (rather than the board) and also functions as an advisor to the president and management on issues of social and environmental policy (World Bank 2006d: 12-13).19

In short, the very existence of the Bank’s safeguard policies and complaint and response

mechanisms may be seen as a major “success” in civil society efforts to hold the institution to account However, as we elaborate in the third section of this paper, some of these gains have been eroded in revisions of a number of safeguards in recent years, particularly at the IFC.20Similarly, we note a series of limitations in the Bank’s disclosure policy

Policy Level Accountability

17 The ten safeguard policies are: OP/BP 4.01 Environmental Assessment, OP/BP 4.04 Natural Habitats, OP 4.09 Pest Management, OP/BP 4.12 Involuntary Resettlement, OD 4.20 Indigenous Peoples, OP 4.36 Forestry, OP/BP 4.37 Safety of Dams, OPN 11.03 Cultural Property, OP/BP 7.50 Projects on International Waterways, OP/BP 7.60 Projects in Disputed Areas For all safeguard policies, see http://go.worldbank.org/WTA1ODE7T0

18 The private sector arm of the Bank includes the International Finance Corporation and the Multilateral Investment Guarantee Agency (IFC and MIGA)

19 See also www.cao-ombudsman.org and www.inspectionpanel.org The relative advantages of these two

mechanisms for enabling accountability — the highly visible and independent nature of the IP process, as compared

to the more agile and lower key approach of the CAO — have not been systematically examined

20 For an analysis of the IFC’s review of its safeguards, see Bank Information Center (2007) and Halifax Initiative Coalition (2006) For a listing of concerns on the weakening of IBRD safeguards as a result of the Bank’s Country Systems Approach, see Bank Information Center (2004)

During the tenure of World Bank president James D Wolfensohn from 1995-2005, the institution revised several of its most important environmental and social safeguard policies, including those on resettlement, indigenous peoples, and forests It also conducted strategic reviews of some of its most controversial lending practices—including structural adjustment lending and support for extractive industry and large dam projects Each of these processes included a significant public consultation component This reflects the World Bank’s recognition that these review processes would not be considered to be legitimate or methodologically rigorous unless they included the perspectives of affected stakeholders (Sherman 2001: 4) This was an important advance over its approach in earlier generations of policy revisions, in which transparency and public input were far more circumscribed

A number of these engagements were largely ad hoc in the sense that there were no formal protocols or guidelines for the design of the policy reviews Moreover, many of the consultations suffered from a common set of problems: lack of clear objectives, mismatches in expectations between the Bank and civil society groups, and an eventual distancing (and in some cases rejection) by the Bank of recommendations emerging from those policy reviews The resulting

accountability regime can thus be described as consultative in the sense that civil society inputs

were invited, but the degree to which they actually impacted the Bank’s final decisions remains unclear

The consultations with civil society did, however, result in the identification of two feedback mechanisms as being especially important, though not uniformly employed, for purposes of accountability The first involved the distribution of iterative drafts of policy revisions for comment prior to board review When employed, this mechanism allowed participants a chance

to comment on how their inputs would be incorporated before final decisions were taken.21 The second mechanism was a matrix that compiled all comments and explained how each input was addressed in the policy revision, or why it was not accepted This mechanism, which was used

by the Bank in developing its “Issues and Options” paper for improving relations with civil society, appeared to be gaining greater currency within the Bank towards the end of James Wolfensohn’s tenure (World Bank 2005b: 50) However, as discussed further below, participants

in these policy level engagements showed significant signs of fatigue towards the end of Wolfensohn’s presidency, largely because of disillusionment on the part of both civil society groups and Bank staff with the results of the consultations This frustration arose from the Bank’s inability to manage the process — leading to unrealistic expectations on the part of CSOs

as well as its own staff — and a failure to strategically integrate the consultations with an agenda for reform that it could reasonably take to the Board

Bank staff point to the more recent global consultations, on its governance and anti-corruption strategy, as indicative of a much improved consultation process that has incorporated lessons learned from the past including, for example: posting background documents and consultation schedules on the web, translating documents into five languages, giving CSOs sufficient lead time to prepare, inviting prominent CSOs such as Transparency International to co-host

21 IFC’s reluctance to produce such an “indicative draft” prior to Board review was a source of significant frustration

in its Safeguards Policy review (Bank Information Center 2004b)

meetings, and summarizing and posting feedback received.22 This experience also indicates that many civil society organizations continue to engage the Bank despite frustrations with past processes

However, there are at least two reasons for avoiding reading too much into the anti-corruption consultations First, in its own documentation of the consultation process, the World Bank notes that the consultation was described by several groups as rushed, particularly at the early stages, although it has also raised expectations that a more thorough process would follow (World Bank 2006b) Second, and more important, the anti-corruption consultations centered only on a very general strategy document which lacked specificity with respect to Bank policies or implementation These consultations are thus not easily comparable to earlier dialogues that focused on more specific policy development A more comparable test will arise in the Bank’s next review of its information disclosure policy Civil society groups that submitted written comments to the anti-corruption strategy were very clear about this difference:

While we recognize that the focus at this stage of the process is still on collecting feedback on the strategy paper itself, we observe that there is little specificity in the proposed work plan [A]s external stakeholders, we do not have a clear sense of how practice within Bank Group operations will be evolving It would be very helpful for the Bank to publicly share a more detailed update on the process by which implementation of the strategy will proceed, and identify clear opportunities for external stakeholders to contribute (World Resources Institute Undated)

Other groups were harder hitting, pushing either for more clarity on the process, or urging the Bank to address corruption by adopting the recommendations of previous consultative experiences: “Although the strategy acknowledges the importance of participation, this principal has not been consistently reflected either in the priorities specific in the framework or in the formulation of the framework itself; the framework should explicitly lay out consultation principles and strategy for engagement with key external stakeholders (emphasis in the original);” (Bank Information Center 2007) and “the Bank could lead on this by acting on the recommendations of the recent Extractive Industry Review” (Parliamentary Network on The World Bank Undated)

Board Level Accountability

Civil society organizations have also sought to increase accountability in the World Bank’s formal governance — its boards The governance structure of the Bank is based upon a corporate model, in which member government shareholders are represented by a Board of Governors The Governors meet once a year, and delegate responsibility for supervising day to day operations to

a Board of Executive Directors (commonly referred to as the board) Voting power on these boards is apportioned based on member governments’ ownership share in the institution Public voice and accountability is secured indirectly through state representation In principle,

management and staff are accountable to the member states through their board representatives, who, in turn, are accountable to their citizens At face value, this structure appears to enable

22 For details, see http://go.worldbank.org/APQ5N1BF30 The consultations were held in late 2006 and early 2007 in

37 developing countries and 12 donor countries, with about 3200 participants in total

formal “upward” accountability to owner governments as well as “downward” accountability to their citizens, with greater accountability to those with the greatest financial investment in the institution On the basis of this representational legitimacy, country governments and board members have sometimes chided civil society protesters with the critique “Whom do you

represent?”

The World Bank’s governance model has, however, been widely criticized as being inconsistent with the basic tenets of democratic and accountable decision-making Many critics, including governments, civil society organizations, other international institutions, academics and Bank staff have observed that the Bank is not sufficiently representative, transparent, open to public participation, or accountable to those who are affected by its operations.23 We outline only a handful of the major critiques here The nature of accountability at the board level can be

characterized as a global capital regime, largely because of the dominance of nation-states or

blocks with large economies (i.e., the lending governments) over poorer nations that are the most affected by Bank operations (i.e., the borrowing governments), and the disproportionate influence of finance ministries coupled with the near-absence of scrutiny by elected parliaments

It should be noted at the outset that governance reform is probably the most “unsuccessful” arena

in terms of civil society efforts to increase World Bank accountability

The most commonly raised concerns about governance concern the disproportionate allocation

of voting shares to donor countries on the Governing Board, and the inequitable allocation of seats on the Executive Board Although the World Bank has 185 member countries, voting shares are apportioned to each member country roughly in accordance with the size of its economy.24 This weighted voting system decidedly favors the major donor governments, particularly the United States The G-7 countries control nearly 43 percent of the voting shares, with the United States alone controlling about 16.4 percent.25 Meanwhile, the voting rights of many poor borrowing countries are so small as to be essentially symbolic For example, the 46 sub-Saharan African countries have a combined voting share of only between 5 to 6 percent This voting arrangement is problematic from the perspective of fair and democratic representation, because it disenfranchises those with the greatest interest in Board decision-making – i.e., the poorest countries that are most affected by Bank decisions have the least voice (Griffith-Jones undated; Nye et al 2003: 67-68; United Nations 2005: 72)

This problem is compounded by the inequitable allocation of Executive Director seats The Board is comprised of only 24 Executive Directors to represent all 185 member countries This means that many countries must share representation Eight of the most powerful countries are represented by their own Executive Directors, while the remaining 177 countries are grouped into 16 constituencies of 4-24 countries each.26 These “constituent” executive directors are typically appointed for only two-year terms, thus creating incentives for them to represent the interests of their own country rather than the multiple countries they represent, particularly where

23 See, for example UNDP (2002: 112); Calieri and Schroeder (2003: 4); Bretton Woods Project (2003); and Woods (2003: 2).

24 In reality, the formula for allocating voting shares underestimates the size of developing economies, and therefore affords them even less opportunity to influence decision-making

25 Based upon voting shares at the IBRD These figures are published in the financial statements section of the World Bank’s annual report See World Bank (2007: 57-61)

26 These are the United States, France, Germany, Japan, the United Kingdom, Russia, Saudi Arabia and China

those interests are diverse.27 Thus, the Executive Director that represents 24 sub-Saharan countries for a two-year period can not possibly be as effective for all these countries as the United States Executive Director, who represents one country, and is appointed for an indefinite term Moreover, those constituencies that include both donor and borrowing countries are almost always represented by an official from a donor country (Calieri and Schroeder 2003: 4).28

This disparity in voting power between developed and developing countries creates a substantial moral hazard problem — since the donor countries that wield the most voting power do not borrow from the Bank, they are not accountable to citizens who bear the risks of their decisions (Bradlow 2001: 18).29 The separation of decision-making power from political accountability allows donor governments to govern the institution in accordance with their own domestic political interests As Ann Florini has observed, “[g]overnments, answerable only to domestic electorates, face few incentives to act for the benefit of someone else’s constituency” (Florini 2003: 14) Notably, the heads of state that gathered in Monterrey in 2002 to address the problems

developing countries and economies in transition in international economic decision-making and norm setting,” and specifically called on the World Bank to enhance participation of all developing and transition countries in their governance (United Nations 2003: para 62)

Yet the problems of accountability to citizens in borrowing countries is more complicated than simply increasing the voting power of developing countries Arguably, borrowing countries have less of an incentive than donor countries to increase transparency and disclosure practices or to strengthen social and environmental safeguards It is the developing country members on the Bank’s board that have tended to oppose reforms on issues such as gender equity, environment, participation and anti-corruption The problem of board voting is thus not just about increasing the influence of developing country governments, but also about increasing accountability to citizens in those countries who are affected by their decisions

Accountability to affected citizens is also undermined by weaknesses in transparency about board deliberations, and an absence of mechanisms for linking citizens in borrowing countries to executive directors For most of the world’s citizens, the chances of holding their representatives accountable are small For one thing, public accountability of executive directors is significantly impaired by board secrecy.30 But even if board deliberations were more transparent, it would still

be difficult for citizens to determine how they were being represented, since decisions are

While the board’s work is mostly done by consensus rather than by vote, a cynical interpretation of this practice is that it serves

as a cover to insulate board members from accountability to citizens they claim to represent When votes are taken, they are typically kept secret

30 Transcripts of meetings and summaries of Board discussions are not made public.Changes to the disclosure policy in 2005, however, allow for names of Executive D irectors who wish to be recorded as abstaining from a vote or objecting (and thus the names of those who supported a decision may be inferred) They also allow Board minutes to be disclosed after approval by the Board, but members can redact any material prior to release See World Bank (2005e: 4)

usually made by consensus without formal votes being taken.31 Thus while the board does actually make minutes of its meetings available, these are sanitized documents – neither transcripts of discussions nor voting records are typically available While individual directors are free to explain to their constituencies how they voted and why, few are required or choose to

do so on a routine basis Since votes are usually not taken, and since records of those votes and the deliberations that preceded them are not publicized, citizens simply do not know how their executive directors are representing them Without this basic information, citizens have no way

to hold their executive directors to account (Calieri and Schroeder 2003) Finally, there is nothing that citizens in one country can reasonably do to hold an executive director from another country accountable for his or her actions, despite that fact that the decisions of directors directly impact countries other than their own

Representatives of borrowing governments are further disadvantaged by the balance of power between management and the executive directors They often lack the kind of analytical support from parent ministries that helps donor Executive Directors to stay on top of the complex issues before them Moreover, because Executive Directors that represent constituencies are rotated frequently, they have little time to master the issues before they are replaced These Executive Directors are further disadvantaged by the widespread perception that Board approval is merely a ratification of decisions that have already been made by management in consultation with most powerful members, and that efforts to exercise influence are therefore essentially futile (IMF1999; Woods 2003) This is exacerbated by the fact that management and staff seldom divulge internal policy disagreements to the board, preferring instead to present a unified front in board discussions As a result, the board is deprived of the opportunity to participate in these debates, or to hear and consider the alternative views of those whose arguments did not prevail within the organization

In addition, representation of affected people is compromised by the fact that finance and development ministries of member states dominate decision-making Although the World Bank

is supposed to be the agent of its member states, it is in effect administered by a “club” of officials that represent only a narrow spectrum of the political apparatus of its member states—the finance and development ministries (Keohane and Nye 2001) Thus, the Bank is governed by

“parts of governments working with similar parts of other governments,” but excluding other, more democratically responsive, parts of their own governments (Nye et al 2003: 4).32Representation by narrow and relatively unaccountable departments of the government raises serious questions about whether the broader public interest, or the interests of other constituencies are being adequately represented In particular, citizens concerned about issues that have little to do with the authority or expertise of the finance ministries—such as poverty reduction, health care, human rights, gender equality or the environment—are not likely to enjoy

responsive and accountable representation through this arrangement

31 While consensus decision-making would appear at first blush to neutralize the differences in voting power

between the Directors, in practice it reinforces them without requiring that power to be explicitly invoked

Consensus does not require unanimity, but reflects the Chairman’s “sense of the meeting,” which is determined by the voting power of those who express their support or opposition to a given outcome (Birdsall 2003).

32

While this problem may originate at the country level, with ministries of finance typically hold more power than others, it is reproduced and strengthened in global institutions where these ministries are accorded privileged positions

A related and more significant problem is that the role of national parliaments in overseeing the behavior of directors is generally very weak Legislators usually have only limited access to critical documents about World Bank and IMF operations in their own countries Rather, key decisions have typically been made by the finance and development ministries (along with the World Bank and IMF), with only limited parliamentary participation and oversight (Halifax Initiative et al.,2004: 4) The independent Parliamentary Network on the World Bank (PNoWB) has recommended that the World Bank Executive Board refrain from approving certain documents (such as the Poverty Reduction Strategy Papers required of heavily indebted poor countries) unless they have been reviewed by the national parliament (Rowden and Irama 2004: 39) The Bank has maintained that such a requirement would violate its Articles of Agreement, which prevents it from interfering in the political affairs of any member country (World Bank 2005d).33 Many parliamentarians counter that the Bank’s focus on finance ministries as the fulcrum of fiscal and development policy making is itself political interference, insofar as it tends to alter the balance of power between the ministries and parliament (ActionAid International et al 2005)

In democratic nation-states, governments typically bolster public accountability through a rubric

of institutional checks and balances in which certain branches or agencies of government are empowered to oversee and sanction others No such “horizontal” mechanisms exist at the international level to constrain Bank decision-making by force of law or threat of sanction. 34Each of the potential mechanisms of horizontal accountability—the United Nations, the International Court of Justice, and international human rights courts and tribunals—is inadequate Of these, the United Nations would appear to be the most promising, since the Bank

is a Specialized Agency of the UN However, the Relationship Agreement between the UN and the Bank specifically precludes the UN from involvement in the Bank’s discretionary decision-making with respect to its lending operations.35 The ICJ is also unavailable as an accountability mechanism because only states can bring cases before it.36 Moreover, the Bank’s Articles of Agreement preclude member states from bringing legal action against the Bank.37 Finally, international human rights law as applied by courts and tribunals has so far proved equally unavailing The Bank has argued that its Charter prohibition on interfering in the “political affairs” of its member countries limits how it can consider international human rights conventions (Shihata 1991; 1992) While civil society and academic observers have sharply criticized this argument, and the Bank may be rethinking this position, no court has yet addressed the parameters of the Bank’s human rights obligations

Finally, questions on the accountability of the Bank’s president have received extensive public attention in the lead up to the resignation of Paul Wolfowitz in May of 2007 While the media hype and board deliberations centered primarily on whether the president abused the powers of his office in arranging a pay and promotion package for his partner, Shaha Ali Riza, a much

33 The problem appears to be more at the executive level than the staff or management level, with the latter

increasingly engaging parliamentarians with the PNoWB

34 See, for example, (Goetz and Jenkins 2002: 7; Grant and Keohane 2005; Oloka-Onyango and Udagama 2001)

35 Agreement Between the United Nations and the International Bank for Reconstruction and Development (IBRD), art IV(3) 16 U.N.T.S 346 (1948)

36 Statute of the International Court of Justice, art 34(1) (1945)

37

IBRD, Articles of Agreement, art VII(3) World Bank loan and credit agreements do include arbitration provisions, but they have never been invoked

more significant issue of public accountability has received considerably less attention — the presidential selection process The former is a professional (staff-level) accountability issue, while the latter concerns governance-level accountability The accountability of the Bank’s president to the board and to citizens of member governments is severely diluted by the United States’ prerogative to name the Bank’s president The informal arrangement in which the president is selected by, and therefore accountable to, the United States greatly enhances American power within the institution, while undermining the authority of the board (Kapur 2002: 60).38 Because the president has considerable discretion in shaping the institution’s agenda, rules and processes, the United States’ prerogative to name the president means that it actually wields much greater power than its voting shares would suggest This prerogative has been widely derided as being impossible to reconcile with basic principles democratic governance (Bapna and Reisch 2005; Bretton Woods Project 2003; IFI Democracy Coalition2005; UNDP2002) Thus, in 2001, a joint World Bank-IMF working group called for a meritocratic selection process open to qualified candidates of any nationality (World Bank and International Monetary Fund 2001) A number of civil society groups have long been pushing for reforms guided by two basic accountability principles: transparency of process, and competence

of prospective leadership without regard to national origin.39 In an unprecedented action, nearly one hundred current and retired Bank staff, including some vice presidents, signed a letter issued

by civil society calling for reform The chorus of change was joined by statements by the finance ministers of Australia, Brazil and South Africa, as well as by several U.S congressmen (Goodman 2007)

In the end, these unprecedented calls for opening up the presidential selection process did not affect how the current president, Robert Zoellick, was selected The U.S is not about to relinquish its prerogative to name the president, and nor are the Europeans likely to give up theirs at the IMF But the current president’s legitimacy, like that of his predecessor, continues to

be questioned by many civil society groups, and even by some member states and Bank staff — regardless of his qualifications for the position This reinforces two fundamental challenges of democratic accountability facing global public institutions The first is that problems of legitimacy (how the president is selected) matter as much as problems of effectiveness (the president’s abilities to run the institution) The second is that the global capital regime, characterized by the concentration of power in the hands of a small number of wealthy states, continues to dominate the most important governance decisions in the World Bank

In sum, the challenges of accountability at the level of board governance are the most daunting because the very foundations of governance — vote allocation proportionate to economy, representation by finance ministries, absence of parliamentary scrutiny, the US prerogative in presidential selection, and the relative voicelessness of the poorest and most affected actors — are at odds with fundamental premises of democratic decision making and accountability This is also the arena in which civil society efforts for reform have had the least impact

38

While the US does not have a de jure right to have its nominee approved, and the process allows for anyone to be nominated by

a member country, this is meaningless given the lack of political will in the US and Europe to give up their arrangements of

“tradition.”

39 See, for example, a statement on “Leadership Selection Reform at the World Bank and International Monetary Fund” issued by the New Rules for Global Finance coalition in May 2007, with 676 signatories ( www.new-

Wolfowitz’s resignation demanding a “broader governance overhaul” ( www.bicusa.org/en/Article.3289.aspx )